British Airways owner IAG sees profits rise

GRAEME EVANS AND SCOTT REID

THE owner of British Airways has forecast a big jump in profits this year as it benefits from the “remarkable” turnaround of Spanish carrier Iberia.

International Airlines Group (IAG), which was formed from the merger of the two airlines in 2011, yesterday posted operating profits of €1.39 billion (£1bn) for 2014 after it returned Iberia to the black following many years of losses.

In 2013 we said our intention was for Iberia to break even in 2014 and it has fulfilled that promise.

IAG chief executive Willie Walsh

With lower oil prices also helping the performance, the operating profit of British Airways increased to €1.21bn, after it boosted capacity with the delivery of five additional Airbus A380s and four Boeing 787s.

The group said it expects further improvement from the two airlines this year, with overall operating profits set to exceed €2.2bn.

Fuel costs and emission charges fell by 6 per cent to just under €6bn last year and are expected to remain at a similar level in 2015.

The improved performance comes as IAG continues to drum up support for its £1bn takeover offer for Irish carrier Aer Lingus.

IAG chief executive Willie Walsh praised the improvement at Iberia, which made an operating profit of €50 million last year, compared with an operating loss of €166m the previous year.

He said: “The airline’s turnaround has been remarkable, both financially and operationally, and we’re very proud of its achievement especially its strong cost discipline. In 2013 we said our intention was for Iberia to break even in 2014 and it has fulfilled that promise.”

Iberia’s restructuring saw 2,500 staff leave the airline under a voluntary redundancy programme, while salaries were reduced by between 11 per cent and 18 per cent. The group employs a total of 60,000 people, including at carrier Veuling.

Analysts at brokerage Liberum reiterated their “buy” rating on the stock, noting: “IAG remains our top pick amongst the European airlines. It has positive earnings momentum with a better trading performance than its network carrier peers and it is showing clear benefits from its restructuring efforts.”